Facebook IPO: worth the price or next Internet bubble?

Steve Henn | NPR

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Many investors are expecting Facebook to file papers for an initial public offering sometime later this week. The company, which was founded in a Harvard dorm room less than a decade ago, is expected to be valued at nearly $100 billion by Wall Street.

And if these early reports are true this is shaping up to be the biggest Internet IPO ever.

"It will be larger than the Google IPO — larger than the Amazon IPO — the largest internet IPO in history," says Kathleen Smith. She tracks initial public offerings at Renaissance capital. "It's rumored that they will seek to raise $10 billion."

The deal could create more than a thousand Facebook millionaires and will likely give Facebook's 27-year-old co-founder and CEO, Mark Zuckerberg, a net worth north of $20 billion dollars — at least on paper.

So this all kind of begs the question: Is Facebook worth the price, or is this another Internet bubble in the making?

"This is very expensive company, let's face it," says Sam Hamadeh, who follows the tech industry and Wall Street for the financial research company PrivCo. "At a hundred billion dollars you are talking about one of the largest companies in the United States, or the most valuable companies. The upside is reasonably limited."

Hamedeh believes this is one of the reasons that Morgan Stanley may end up leading the IPO instead of Goldman Sachs. Morgan has an enormous network of brokers who sell stock to wealthy individuals like doctors, lawyers and retirees.

"Those are the kind of people who will buy without digging too much into the numbers or being picky about the value of the company," he says. "They tend to buy company names that they recognize."